Part 2: Financial Tension Between Couples
by SGL Financial
Our 2 Cents – Episode #146
Part 2: Financial Tension Between Couples
Steve and Gabriel are wrapping up their discussion on the kinds of financial stresses couples can face, and how to work your way through them together. Plus, they’re sharing some financial tidbits that have been making their way through the headlines recently.
- Part 2: Financial Tension Between Couples:
- A deeper dive into some sources of debate among couples.
- Gabriel and Steve share some of more common ones they come across when meeting with clients, and the ways they’ve seen couples compromise.
- How having a solid financial plan in place can actually help put a lot of these stresses to rest for you.
- Gabriel’s ‘Quick Hits’:
- Yet another interest rate hike – What possible advantages and risks exist in the current interest rate environment?
- U.S. debt downgraded – What does that mean? Is it a big deal?
- “We were wrong” – A top Wall Street strategist admits his forecast of a stock market crash was incorrect.
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Podcast Transcript
Announcer: You are listening to Our 2 Cents, with the team from SGL Financial, building wealth for life. Steve Lewit is the President of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.
Gabriel Lewit: Hello. Good morning. Welcome to Our 2 Cents. You’ve got Gabriel, you’ve got Steve here for another episode on a sunny day.
Steve Lewit: Is a beautiful day.
Gabriel Lewit: It is humid. It is warm.
Steve Lewit: Yeah.
Gabriel Lewit: It is summer.
Steve Lewit: Yes.
Gabriel Lewit: Can you believe it’s August?
Steve Lewit: Can you believe that we are on a roll for great weather?
Gabriel Lewit: Yes, we are.
Steve Lewit: Yeah. And we are on a roll in the stock market.
Gabriel Lewit: Yep. Stock. Well, it’s waffled a tiny bit-
Steve Lewit: A tiny bit.
Gabriel Lewit: … based on some recent news with interest rates.
Steve Lewit: Yeah.
Gabriel Lewit: Well, we’re going to talk about that.
Steve Lewit: Yeah, we are on a roll with interest rates too.
Gabriel Lewit: Yeah. Everything’s rolling.
Steve Lewit: So, you dug up some interesting data about this week and how special it is.
Gabriel Lewit: Well, I’ve got yeah, I’ve all sorts of interesting tidbits for you as I’m always here to do and we’ll start off with those today. Although I will say we’re going to continue with our last topic. I think we missed a week, but we’re going to continue with resolving financial sources of tension between couples today. So stay tuned for that.
Steve Lewit: Which is really appropriate because of what you’re going to tell us this special week is.
Gabriel Lewit: Well, the special week is National Simplify Your Life Week.
Steve Lewit: Imagine that folks. We have a week dedicated to simplifying our lives.
Gabriel Lewit: Yeah. So it’s August 7th through 14th.
Steve Lewit: Yes.
Gabriel Lewit: And it’s all about self-observation and I forget what the little tidbit on the website said, but yeah, it’s about making sure your life is simple, simpler, as much as it can be in today’s pretty complicated world.
Steve Lewit: Yeah. So Gabriel, what one thing will you do to simplify your life this week?
Gabriel Lewit: Well, I am going to eat out breakfast every day of the week.
Steve Lewit: Right. No cooking for you.
Gabriel Lewit: There we go.
Steve Lewit: Yeah, I like it.
Gabriel Lewit: I’m going to give you my kids for the week.
Steve Lewit: Yeah, I like it.
Gabriel Lewit: That’ll help simplify your life too, right?
Steve Lewit: Yeah. Well there’s always the before they come in after they leave time.
Gabriel Lewit: Yes, yes, yes, yes. So it just a little fun there for you to think through. What can I do to simplify my life? One of those of course could be working with a financial advisor.
Steve Lewit: Yeah.
Gabriel Lewit: Toot our own horn a little bit, we take off all the heavy lifting for you. We do all the nitty gritty analysis for you. We get in the weeds with your numbers and investments and taxes and everything else. Also, that you don’t have to
Steve Lewit: Yeah, that was a good plug.
Gabriel Lewit: Yes, indeed.
Steve Lewit: I like it. Perfect opening there.
Gabriel Lewit: Ironically enough, August 5th was also Work Like a Dog Day.
Steve Lewit: No.
Gabriel Lewit: Yes.
Steve Lewit: August. What day was August 5th?
Gabriel Lewit: That was…
Steve Lewit: What’s today? I can’t believe it’s August.
Gabriel Lewit: Well, I already said that.
Steve Lewit: I know.
Gabriel Lewit: Yeah.
Steve Lewit: Did you say that?
Gabriel Lewit: I said, can you believe it’s August?
Steve Lewit: Yeah. Well I agree with you. I can’t believe it’s August. What’s today? What’s today’s date? The third. So August 5th. We have to work like a dog on August 5th.
Gabriel Lewit: Well, I was assuming that by the time people listened to the show it would’ve already been August 5th. So I was speaking the past tense, even though currently it’s in the future.
Steve Lewit: Yeah, that’s what confused me. It’s like, “No, today’s in August 5th.”
Gabriel Lewit: Well, that’s why I said was.
Steve Lewit: Was, yeah. I get it.
Gabriel Lewit: Anyways, sorry about that, folks.
Steve Lewit: Sneaky, sneaky.
Gabriel Lewit: But yes, it’s kind of interesting that Simplify Your Life Day is shortly after Work Like a Dog Day. So maybe you’re supposed to work like a dog and then simplify it.
Steve Lewit: How does something become a national day?
Gabriel Lewit: I think you can just make them up.
Steve Lewit: We should.
Gabriel Lewit: I’m pretty sure.
Steve Lewit: So, we could have an SGL Day.
Gabriel Lewit: I think there’s like hundreds of national days and national weeks now and national months and I think just random people get together and just decide it and then Google posts it and then it’s real.
Steve Lewit: Well since we are random people, we could have an SGL Make Your Life Easier Week.
Gabriel Lewit: National Cook a Waffle Day.
Steve Lewit: Cook a waffle day. Wafflelocious.
Gabriel Lewit: Bake a baked potato day. I’m sure it could be out there.
Steve Lewit: I bet it’s out there already.
Gabriel Lewit: Yeah, you just don’t know folks. So stay tuned for more fun facts on Days of the Year from SGL Financial.
Steve Lewit: I think we better get to something more meaty.
Gabriel Lewit: You think?
Steve Lewit: Yeah.
Gabriel Lewit: You think?
Steve Lewit: Yeah, I think it’s time.
Gabriel Lewit: Okay. All right. Well we are going to talk about, as I said, continuing this conversation about resolving conflicts between couples. And so if you weren’t on the last show, we’re listening to the last show I should say, or if you forgot. We were talking about how couples have differences in opinions on various financial topics such as risk tolerance, their retirement ages, what they want to leave for children, housing, overall retirement lifestyle, emergency fund savings, whether or not to be charitable. What to do with inheritance money, insurance, financial management, should we improve our house, should we not? Basically anything and everything one could disagree upon of couples often disagree upon.
Steve Lewit: And those are the-
Gabriel Lewit: Not always, but often, okay?
Steve Lewit: And those are the source of little arguments.
Gabriel Lewit: Yes, indeed.
Steve Lewit: And disagreements or major battles and also the number one reason for divorce.
Gabriel Lewit: Yeah. So that’s why we were talking about this saying, “Hey, if you and your spouse or significant other are struggling with talking about various money things and you want to get a sense of, ‘What do we do about these,’ maybe today’s show will continue to give you some tidbits of how you can resolve any sources of stress so everything is peaceful and harmonious.”
Steve Lewit: So, we have our marriage counseling sign out there on the front door today.
Gabriel Lewit: Sure.
Steve Lewit: There we go.
Gabriel Lewit: There you go.
Steve Lewit: There we go.
Gabriel Lewit: All righty. So last time we were diving a little deeper into all of these, we were talking about risk tolerance and different ways that different parts of the couple of the, spouses I should say.
Steve Lewit: All right. Okay.
Gabriel Lewit: Not like arms and legs, but like husband, wife.
Steve Lewit: I’m good with different parts of the couple.
Gabriel Lewit: Yeah. Maybe one of them has their account longer term a little more aggressive, but the other spouse feels okay, his or hers is more safe and more conservative. What we were talking about is that basically you can accomplish both of these with a well-defined financial plan generally is where that starts. Because otherwise if you’re just randomly picking investments based on your risk profile without an overall bigger picture plan, you might be heading in the wrong direction. You just wouldn’t know.
Steve Lewit: Yeah. So I had an interesting question yesterday from a new client. We were doing some planning and talking about different products and they were having conversations with each other. They’re pretty much on similar wavelength. And she asked me, she said, “Steve, what percentage of your client’s conversations are driven by men or women?” And I thought that was a really interesting question because when one person dominates, then their risk profile takes over the conversation.
Gabriel Lewit: Yeah.
Steve Lewit: And the other person tries to remain quiet about it because they don’t know enough about it, or they don’t want to create an argument or they feel it’s not their place for whatever reason. And by the way, I’ve noticed recently that more and more women are leading the conversation than men. Years ago it was always the man that led the conversation and the woman said, “Oh, I don’t know anything about that. I’ll just leave it to him.” Which isn’t a great thing I think, but now more women are leading the conversation. Either way when one person is the leader in a conversation, I find I have to be very cognizant that the other person may not say anything and I have to help that person. I need to identify what their risk profile is even though they’re not saying anything.
Gabriel Lewit: Certainly. Yes. Yeah, that’s very important. I mean we want both of you, if you’re a couple to feel included in the conversation, in the development of your plan and the investment recommendations that might be in there and to feel good about it. And so I think you’re spot on. Oftentimes the individual in the couple that manages the finances tends to take point, but it’s a little bit more complex than that.
Steve Lewit: It is, yes. What do you got next?
Gabriel Lewit: So, our next one was retirement age. And this is very, very common and also exacerbated if you’re in a relationship with a younger or older spouse or significant other. And the challenge there is, let’s say you’re 60 and you want to retire in five years and your spouse is, I don’t know, 50 and in five years you’ll be 65 and she’ll be 55.
Steve Lewit: And she loves what she’s doing and vice versa.
Gabriel Lewit: She loves what she’s doing, or you think maybe you’re thinking, “Hey, I’m going to retire,” and she’s going to keep working and making all the money and maybe she doesn’t want to keep working and making all the money.
Steve Lewit: Or you want to travel, and she wants to work.
Gabriel Lewit: Yeah. So how do you handle this dad when you’ve got age differences as well as retirement age differences. Another example could be, let’s say you’re both 60 and one of you wants to retire now and the other wants to work, loves their job, wants to work till 70.
Steve Lewit: Yeah.
Gabriel Lewit: So, it can happen even if you’re the same age as well.
Steve Lewit: So, what I try to do, Gabriel, it’s that old word compromise.
Gabriel Lewit: When did that become such a thing?
Steve Lewit: What’s compromise, right? Which is difficult if I have high energy, high level executives that are really strong-willed and really want things to go their way, it becomes much more difficult. Some couples are really malleable and they’ll talk to each other. And when we’re doing a plan, I’ll say to one person, “So when do you want to retire?” And they’ll say, “65.” And I’ll say to the other, “When do you want to retire?” And they’ll say, “I think 70.” And then he says, or she says, “Well I don’t know, we won’t be able to travel.” And then they compromise.
Gabriel Lewit: Yeah. And I think in general, if everyone just compromises agreeably on all these topics-
Steve Lewit: Yeah.
Gabriel Lewit: … we don’t have much to talk about.
Steve Lewit: But then the other side of the coin is you’ve got strong-willed people that are used to having it their way or they’re in positions of power in their companies or they’re more dominant in their personalities and they want it their way. And sometimes they just get it their way by overriding their spouse’s feelings. And it’s very difficult, I think in my position, your position Gabriel, because we can’t insert ourselves directly into that conversation. We’re not therapists.
Gabriel Lewit: Well, and you don’t want to pick sides.
Steve Lewit: And you don’t want to pick sides. Right. So it is a very difficult problem of retirement age.
Gabriel Lewit: Yeah. And in some cases what we do here is we just draw attention to the mismatch or the discrepancy for you so sometimes it just helps to hear that we say, “Hey John, Jane, you guys have to figure this out because John, you want to travel and you want to have Jane with you. Jane you want to work but those two don’t jive. How do you work through that?”
Steve Lewit: Yeah, how are you going to work through that?
Gabriel Lewit: And in some cases, you got to go home and chat through this.
Steve Lewit: Yeah, of course.
Gabriel Lewit: And tell us what you’re thinking.
Steve Lewit: Or fight through this.
Gabriel Lewit: Hopefully not fight.
Steve Lewit: Hopefully not, yes. All too often that’s the case though.
Gabriel Lewit: So generally, what we’ve seen there is by and large there ends up being some form of compromise there typically with clients. Maybe splitting the difference in between the years, whatever the case might be.
Steve Lewit: And I think a couple has to identify Gabriel, what’s really important to them is the work top priority is traveling with your spouse and having a good time, a more greater priority.
Gabriel Lewit: And again, going back to the financial plan without a plan to show you, maybe it’s not even financially that one retires at 55 and they have to keep working till 65, even if that means their spouse would be 75 at that point. So sometimes the plan will help answer these questions for you. But it’s also interesting when you see a plan that can work financially either way, then you really get down to what you were just saying, what’s most important? Is the extra money more important or is that time with your other half that’s retired more important and valuable.
Steve Lewit: If sometimes Gabriel feels like my clients would prefer if there were no options. They just had to do it one way or the other.
Gabriel Lewit: Yep.
Steve Lewit: But you’re right, when they have options it’s like, “Oh my gosh, I could retire today, but what do I do because my wife wants to work, or my husband wants to work.” So they have options and it becomes a much more difficult decision to make because there are more options. Yep.
Gabriel Lewit: Yeah, exactly. So there’s a lot on this list. I don’t think we’re even going to get to all of them. We’re going to just pick maybe one or two more here for today and then we we’ll probably call it a wrap on this topic. And of course if you have questions on it, you can always call us any anytime at (847) 499-3330 or email us info at sglfinancial.com.
Steve Lewit: Good plug.
Gabriel Lewit: Thank you so much, sir.
Steve Lewit: You’re welcome.
Gabriel Lewit: Well, what about retirement lifestyle? And one person is a stay at home, stay at homer.
Steve Lewit: Yep.
Gabriel Lewit: And the other is a busy bee traveler.
Steve Lewit: Yep.
Gabriel Lewit: And how do those two, well first of all, how they wind up together is always an interesting one. It just happens I think.
Steve Lewit: Yep.
Gabriel Lewit: But the bigger question of course is what do they do about that when it comes to retirement?
Steve Lewit: One travels and the other doesn’t, seen that a lot. “So where’s your husband?” “Oh, he is away in Switzerland,” or, “He is traveling through Timbuktu.”
Gabriel Lewit: Where is Timbuktu? That’s a real place, right?
Steve Lewit: It is a place. Yeah. Is it in Texas?
Gabriel Lewit: Hold on second, hold on a second.
Steve Lewit: Hold on, we’re going to look up Timbuktu.
Gabriel Lewit: It is fun to say Timbuktu I think it’s a…
Steve Lewit: Yeah. And they just live that way. They understand that and it’s like the same deal if a husband has a hobby, for example. Like one of my clients, the husband has a hobby which is antique cars and racing cars and he’s away all the time doing that because she has no interest in it. And you’re focused on Timbuktu instead of what I’m saying?
Gabriel Lewit: Well, I was trying to figure out where it was, but it looks like our internet that our Producer Katie is using is no longer working for her. So it does not tell us where Timbuktu, it says that Google has a DNS error.
Steve Lewit: She has a plan B option on her phone.
Gabriel Lewit: I guess.
Steve Lewit: Good thinking.
Gabriel Lewit: The question is of course, why is even not working?
Steve Lewit: Yep.
Gabriel Lewit: That’s a separate issue folks.
Steve Lewit: Yes.
Gabriel Lewit: Yeah, so I agree that I think people tend to just work through that as well. And sometimes one couple ends up traveling and sometimes they just stay home and do separate things.
Steve Lewit: Or they find places. I had a couple that really was quite like that Gabriel was not quite a stay at home person, but loved the garden, loved to go to the city rather than get on an airplane and travel and the husband loved to travel. And what they did at my meeting is, I didn’t bring this up, but he said to her, “Let’s find a place where we both really want to go.” And they did.
Gabriel Lewit: Home Depot?
Steve Lewit: Tahiti actually. And it’s like out of the blue, they’ve both agreed to go to Tahiti. Why it was interesting to the non-traveling person, I don’t know but she brought up or she brought up Tahiti and they both looked at each other and it was like, “Yeah, let’s go.” Maybe it’s the mystique of it or the interest of it. They’re going to Tahiti.
Gabriel Lewit: Where is Tahiti?
Steve Lewit: Tahiti is next to Timbuktu, Southeast I believe. South of India. I think Tahiti is somewhere.
Gabriel Lewit: They all have Ts.
Steve Lewit: Yeah.
Gabriel Lewit: What else do you got?
Steve Lewit: Timbuktu, Tahiti and Tallahassee.
Gabriel Lewit: Yeah. I was going to say Tallahassee came to my mind too. A little different there.
Steve Lewit: Do not go to Tallahassee.
Gabriel Lewit: Well, yeah, not as much there as-
Steve Lewit: Not my favorite place as other place.
Gabriel Lewit: It wouldn’t be tops on my list.
Steve Lewit: No. Well it’s the capital-
Gabriel Lewit: If you happen to be from Tallahassee, maybe I don’t know much about it. Send us a-
Steve Lewit: Well, it’s the capital of Florida and as a capital, I think it’s…
Gabriel Lewit: It’s kind of interesting. Many capitals just are not the top destinations in their states.
Steve Lewit: Exactly.
Gabriel Lewit: It is kinda interesting that way.
Steve Lewit: Yeah.
Gabriel Lewit: But anywhos-
Steve Lewit: Like Springfield, Illinois.
Gabriel Lewit: Yeah, I don’t know. No desire to go there.
Steve Lewit: None at all.
Gabriel Lewit: For sure.
Steve Lewit: Did you find Timbuktu, Katie? Where Is it? Hold on what? Hold on folks.
Producer Katie: In the western African country of Mali.
Gabriel Lewit: It’s in the western African country of Mali?
Steve Lewit: Yeah, it’s in Texas.
Gabriel Lewit: Yeah.
Steve Lewit: Mali, really?
Gabriel Lewit: You were close to Timbuktu.
Steve Lewit: Find out where Tahiti is.
Gabriel Lewit: Well, any-
Steve Lewit: Please, please.
Gabriel Lewit: Geography lessons aside.
Steve Lewit: I’m the worst geographer in the world. It’s ridiculous.
Gabriel Lewit: All right, let’s pick one last one here. How about handling inheritances? So you get an inheritance from… This is also tricky because you get inheritances from different sides, right? So you’re married, your wife’s mom or dad passes and you get money there. Is it her money to decide what to do with because it was from her parents? Is it the joint families to decide?
Steve Lewit: Nope, it’s our money, it’s his money, it’s our money. And I think this is the way it works, “This is my money. I got it from my parents. I’m going to do whatever I want with it. We’re not selling the AT&T stock, we’re not going to sell them.” There’s too much emotion in that to tackle that Gabriel.
Gabriel Lewit: Well, and that’s why I’m bringing it up because I do think there are couples out there that say, “Hey, well we are trying to accomplish our financial goals and now this can fit into our financial goals for the future and we were going to do X, Y, and Z and we could really use this money for that. And I don’t think you should take it honey and go spend it all if you wanted just because your parents’ money.”
Steve Lewit: “It’s my money and we’re not touching it.” Or, “It’s my money from my parents and they didn’t mean it for us to buy a new house. It’s going to go to the kids.” They’re very strong-willed. People are very emotional about inherited money. I don’t understand the depth of the emotion, but they are.
Gabriel Lewit: Well, and I’m agreeing with you. I’m posing the question in a way where I’m asking you what would you do if somebody has a different opinion on that? How do you work through?
Steve Lewit: I don’t. I say she… Well I do what you do. I say point out, I say, “Look John, Betty here will not move on that she’s emotionally invested. I think we should move on and not include that money in our plan for the time being.” And I just want to get out of that conversation because just too darn emotional.
Gabriel Lewit: So, in some ways, and I think where I was headed with this and whether or not you think you’re going to have an inheritance coming down the road or not, it’s oftentimes a good thing to not count on it for this reason as well. Because depending on whose inheritance it is. Now, if you’re talking to your own parents and money’s coming in 100% you’ve seen the paperwork, you’ve got a great relationship, it’s unlikely to change, then maybe you can start to plan on that a little bit. But certainly if you’re married and your spouse is the one that’s anticipating an inheritance, I would agree with you maybe don’t plan on that for your goals.
Steve Lewit: No. Yep.
Gabriel Lewit: Unless your spouse feels really open to, “Hey, that’s our money.”
Steve Lewit: Yes. If they look at you and say, “Hey, include it, we want to include it,”
Gabriel Lewit: Yeah.
Steve Lewit: Then you include it but otherwise I’m not going near that. And we never know. This is kind of on the dark side a little bit, but we never know what’s really going on in a relationship. Maybe there’s an anticipation of that relationship ending or a divorce or a separation. Then that inherited money is not the spouse’s money.
Gabriel Lewit: You did go to the dark side.
Steve Lewit: I did. But those are real situations that we find ourselves in Gabriel because we have couples that get divorced and the first thing they do is they identify divorce, inherited money or gift money and that is not considered the family money or community property. So we never know.
Gabriel Lewit: Yeah. Well, so I hope hopefully this has been helpful guys, with all the different ways that couples can disagree.
Steve Lewit: Oh, that’s not helpful. I hope we gave some solutions.
Gabriel Lewit: Well, I mean I was going to finish my sentence.
Steve Lewit: Sorry.
Gabriel Lewit: I just paused-
Steve Lewit: Don’t breathe.
Gabriel Lewit: … for a sip of air.
Steve Lewit: Don’t breathe. I told you that breathing is dangerous.
Gabriel Lewit: I was breathing in-
Steve Lewit: It’s dangerous.
Gabriel Lewit: … to finish my sentence. I was saying, because you obviously discussing what the pitfalls or the speed bumps allows you to navigate around them, hopefully by seeing them as opposed to just barreling over them full speed and crashing your car.
Steve Lewit: Burying them under and then they just percolate underneath as an ongoing gnawing annoyance.
Gabriel Lewit: Yeah. So you kind of want to address them if you think they’re an issue. If you’re not sure where to start, certainly having a plan is helpful. That’ll help put a lot of these different questions into context. If you’re not sure, again, even if you have a plan where to start, come talk to us. We can help you work through these. You just say, Hey “Gabe, Steve, we’ve been disagreeing about this, what do you guys think?” And we can assist however we can so.
Steve Lewit: I thought for sure you were going to give our phone number again?
Gabriel Lewit: No, no, no, not yet. Not yet.
Steve Lewit: No.
Gabriel Lewit: Just wrap putting a bow on that topic.
Steve Lewit: Got it.
Gabriel Lewit: So, all right, let’s switch gears here on a couple things of note. This last week here. Well, the Fed raised interest rates.
Steve Lewit: Yep.
Gabriel Lewit: Again.
Steve Lewit: Yep.
Gabriel Lewit: Okay.
Steve Lewit: Well, everybody knew they were going to do that.
Gabriel Lewit: Yeah, it was pretty well telegraphed. Do you want to talk a little bit about that, Mr. Lew? Mr. President economist though?
Steve Lewit: Yeah, but I’m kind of tired of it.
Gabriel Lewit: Well, we’re not going to make a big thing of it but.
Steve Lewit: Yeah, there might be one more. Look, they’re trying to get inflation down at 2%. They’re not going to reach 2%. I think it’s going to stay three to 4%. When interest rates stop rising, then bonds become more attractive because the values stabilize. I am not sure that bonds, for safe money, I’m not sure that bonds are the best way to go.
You know folks, we have multiplicity of products in our investment menu and bonds of course are in there. But there are other products that are really interesting, like structured notes, like MIGAs for other bank products. So bonds, when you buy a bond, we have to look and say, “Is there something perhaps better than a bond that will give a better return is safer.” But having said that, bonds today are more attractive because interest rates will stop rising.
Gabriel Lewit: Well, I think that’s really one of the key points here about this is if you think you’re at a point where interest rates have peaked or are pretty darn close to peaking, it is an opportune time if you are so inclined to lock in a longer-term rate, right?
Steve Lewit: Yes.
Gabriel Lewit: Whether that’s a bond or a fixed rate MIGA or even annuities that use long-term tenure treasury bonds as a way of structuring how much they pay you in the form of caps or participation rates. All these things are going to be an opportune time before interest rates start being reduced because if you can lock in that for a longer term period, you’re going to be able to reap the advantages of that regardless of what the market does over the next 5, 7, 10 years.
Steve Lewit: Yes.
Gabriel Lewit: And so just keep that in mind if you’ve kind of been sitting on the sidelines, you’re monitoring the rate situation waiting, there may or may not be another one. Nobody’s really clear yet on if that’s going to be the case. And there very well may not be, right? There could be one more small one later this year. We’ll just see.
Steve Lewit: I think so. But it really is incidental and it doesn’t matter much.
Gabriel Lewit: Yep. Yep. So just think about that a little bit there. The other kind of big news was-
Steve Lewit: I just want to insert something there, Gabriel. So folks don’t fall in love with high interest rates. Just a few years ago, interest rates were zero, and I don’t think they’re going to go back to zero, but many people I talked to said, “Well, I can just put my money in a 5% or a yield and just live off the 5%.” I said, “Yeah, you could do that today, but three years from today or four years today it might be just like it was five years ago and you can’t do that. So you got to be very careful about that.”
Gabriel Lewit: Yeah. I’ve got also with an inverted yield curve, it’s interesting because some people, not to get too technical inverted yield curve again as a reminder is when long-term rates are lower than short-term rates. And so there are people that I’ve talked to that are like, “Well, we’re just going to buy the three year that’s paying 5.5 instead of the 10 year that’s paying five or 4.9.” But the risk there, which I think it’s important to always be aware of, is that at the end of three years you go to renew that CD or MIGA or whatever it is, and rates then at that point are two and a half, 3%.
Steve Lewit: 3%.
Gabriel Lewit: Yeah. And so yeah, short term-
Steve Lewit: Cut it down.
Gabriel Lewit: Short-term, you were maybe for the first three years slightly further ahead, but you’ve got to always pay attention to reinvestment risk thinking a little longer term. And that can really help give you some perspective in what to do with your choices.
Steve Lewit: Well said.
Gabriel Lewit: Yep.
Steve Lewit: Yes sir.
Gabriel Lewit: All right. The other news that just came out this last week, which I don’t actually have a printout on it, but Katie, can you just Google US debt downgrade? I don’t know if our internet is working or not here. Maybe it’s come back. Yeah. What was it? Fitch ratings downgraded the US debt rating on Tuesday. That was yesterday from the highest AAA status to AA plus. And there was a little bit of jitters in the market yesterday as a result of that. And it was just citing, there was a few reasons for its downgrade. We’re not going to get too deep into the weeds on this. Just a little soundbite for you, but mostly related to some of the uncertainty about the debt ceiling was part of their rationale and some of the young discourse, if you will, that was going on around that. And there’s a few other reasons, not to get too deep into it. But by and large, in case you’re worried, is that going to have a significant impact on the US long term? It doesn’t appear so.
Steve Lewit: No.
Gabriel Lewit: Most people aren’t too worried about it.
Steve Lewit: I’m going to give an emphatic no; the dollar isn’t going to lose its value. The dollar is not going to become not the reserve currency.
Gabriel Lewit: That’s not the precipice of the market crashing again or anything like that. So sky has not fallen as a result of that.
Steve Lewit: No. It’s just a message that says, “Hey, there were some…” What do you call it? Road bumps.
Gabriel Lewit: Speed bumps?
Steve Lewit: Speed bumps.
Gabriel Lewit: Speed bumps.
Steve Lewit: I couldn’t think of the word. Yeah, “There was a speed bump here and so we’re a little concerned about that.”
Gabriel Lewit: It’s something to monitor. But again, sky’s not falling just yet.
Steve Lewit: Yep.
Gabriel Lewit: All right.
Steve Lewit: Just yet.
Gabriel Lewit: Just yet. I guess you should keep an eye out for this.
Steve Lewit: What crystal ball are you looking at? It’s like, “Will it be tomorrow?”
Gabriel Lewit: That’s good to look up from time to time.
Steve Lewit: From time to time.
Gabriel Lewit: Just make sure nothing’s falling down on you.
Steve Lewit: But just yet sounds imminent.
Gabriel Lewit: Well, no, nothing to worry about that.
Steve Lewit: Okay. Thank you.
Gabriel Lewit: So, the other thing that’s interesting, we like to just pick on this stuff from time to time if you watch or listen to us on webinars or shows, but we always like to talk about people’s predictions of the stock market and how they’re generally wrong.
Steve Lewit: This is amazing.
Gabriel Lewit: And why you shouldn’t listen to predictions of the stock market and instead just build the first five portfolio and not worry as much about it. Just like the Weatherman. Okay, so here’s the title of-
Steve Lewit: No, actually Weathermen do better.
Gabriel Lewit: Yeah, they do much better. That’s very true.
Steve Lewit: Than people that protect the stock market.
Gabriel Lewit: The title here of this is Wall Street’s top strategist admits he was wrong about a plunge in US stocks as the S&P 500 is close to erasing 2022’s decline. Okay, so Mike Wilson, Chief Investment Officer for Morgan Stanley has warned for months that the rally in US equities was a mirage even as stocks kept rising. Just over a month ago, Wilson was forecasting the S&P 500 and his worst case scenario would fall by 14% by June. And then in mid-July, he warned that companies were still overvalued with higher interest rates and falling liquidity. And anyways, now since he said, “We were wrong,” in a note that he sent to clients on Monday.
Steve Lewit: Plain and simple, I made a mistake.
Gabriel Lewit: “2023 has been a story of higher valuations amid falling inflation and cost-cutting,” he continued.
Steve Lewit: Okay.
Gabriel Lewit: But don’t worry folks, he still has some warning signs ahead.
Steve Lewit: Well, there are.
Gabriel Lewit: But that’s an easy thing to say, right?
Steve Lewit: Of course there are. Look how many people predicted there would be a recession at the end of this year?
Gabriel Lewit: Oh, I don’t have it here. But another company just said, “Have to come out and admit we are slashing our forecast for a recession.”
Steve Lewit: Everybody, 90% of the predictions, including my inclination.
Gabriel Lewit: Well, six months ago, everybody that came to see us said, “What do you think? Is there going to be a recession?”
Steve Lewit: When they asked me, “Steve, what do you think?” I always say, “Look, my crystal ball works as well as yours, but I’m inclined to think they would be.” And they would say, “Yeah, me too but there isn’t. And it doesn’t look like there’s going to be.”
Gabriel Lewit: Well, what’s interesting about Mike here is apparently he was voted or ranked the top stock strategist in a survey last October, owing to his fairly accurate prediction that US equities would fall in 2022.
Steve Lewit: Yep.
Gabriel Lewit: So, I think folks, here’s what happens is there’s dozens and dozens of analysts. Their job is to make analytical predictions. Most of them are wrong. Occasionally one of them is right.
Steve Lewit: Well, someone always wins the lottery.
Gabriel Lewit: Randomly, he’s right. And then the world comes out and says, “Wow, look how smart this guy is because he predicted it even though he was just a random one of a thousand strategists that happened to make a prediction that came true.” And then they start to pay more attention to their predictions going forward, even though there was no real validity to how he predicted the prior thing.
Steve Lewit: They get it right once and they’re like Superman.
Gabriel Lewit: And then they have to continue to revise and reforecast and X, Y, and Z. So it just food for thought.
Steve Lewit: Who’s the other guy that doubled down on his?
Gabriel Lewit: Well, he’s a perennial bear.
Steve Lewit: Yeah.
Gabriel Lewit: What was his name?
Steve Lewit: Hussman, John Hussman, I think.
Gabriel Lewit: I don’t know. I don’t have-
Steve Lewit: He’s pretty well known.
Gabriel Lewit: Well, it’s like, yeah, it’s like chicken little, right? Eventually if you say the sky’s falling, it might actually fall one day, right?
Steve Lewit: But well, it will. He will be, what is it? A broken clock or?
Gabriel Lewit: Boy who cried wolf or whatever.
Steve Lewit: A broken, what’s the broken clock one?
Gabriel Lewit: Is right twice a day.
Steve Lewit: Twice a day. It’s the right time. Every dog finds a bone.
Gabriel Lewit: I guess.
Steve Lewit: Hate to put it that way.
Gabriel Lewit: So folks, yeah, don’t put too much stock into it. We always say it. We’ll say it again. Don’t put too much stock into stock market predictions and forecast, because most people are just guessing. And even if they have data signals, it doesn’t mean they still know what’s going to happen. And as you say, and I say our crystal ball is no better than yours or anybody else’s, and building a diversified plan, a diversified portfolio, a well-rounded overall investment strategy and retirement income strategy is going to be the name of the game for success.
Steve Lewit: Well, it shifts the probability of winning in your favor. When you put time on your side, a diversified portfolio, knowing the market has always improved over time. That’s how you win on the market.
Gabriel Lewit: Indeed. Yep.
Steve Lewit: All right.
Gabriel Lewit: Well thanks for joining us today. We hope you enjoyed the show. Have a wonderful rest of your week and we will talk to you on the next one. If you have questions, call us (847) 499-3330 or go to our website, sglfinancial.com.
Steve Lewit: All right everybody, you stay well.
Gabriel Lewit: Take care.
Steve Lewit: Stay healthy and stay cool. Bye now.
Announcer: Thanks for listening to Our 2 cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at (847) 499-3330 or visit us on the web at sglfinancial.com and be sure to subscribe to join us on next week’s episode.
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